Saturday, January 28, 2006

Mr Yap: happy with investment-linked funds

Mr Yap, 43, was one of many policyholders who invested with NTUC Income and made a positive profit. Mr Yap started investing in Technology Fund in October 2002.

Mr Yap committed all his investment between October 2002 to May 2003. There were no education seminars then. He was able to get advice through various discussions with his peers.

Mr Yap is very happy with his investments in Investment Link Products ILP). He has invested in high risk funds such as Technology, Japan, Europe and Growth. He invested about $110,000 in total and have realised $80,000 of his investment, making a profit of about 45% over 2 years!

" I would definitely invest more in future. In the past, I do not believe in ILP or unit trust as the price movement is slow. I prefer higher risk instruments like shares and warrants.

However, I learnt some painful lessons which comes with very bad losses. The lesson leant is, for working people like me, it is better to leave the investment to the professional fund managers who charged reasonable costs. "

Mr Yap acknowledges that it is also less stressful to invest in investment funds and to aim for reasonable good returns. Investing in speculative stocks can be a very stressful experience for a already busy man like him.

" I will not hesitant to recommend my friends to invest with NTUC Income."

Refinance your home loan?

Are you worried about higher interest rates on your home loan?

If you home loan is $500,000 and your bank increase the interest rate by 1%, you have to pay $5,000 more in interest each year. Your bank can continue to increase the interest rate after that, depending on the market condition.

You can protect against higher interest rate by re-financing your home loan with a fixed rate loan. NTUC Income can offer you 5 year loan at a fixed interest rate of 3.99% per annum. This interest rate will not be changed for the next 5 years.

In the market, a bank now offers a 5 year loan fixed at 4.25% per annum. If you take a loan of $500,000 from us, you will save $1,300 a year (compared to the rate charged by the bank).

NTUC Income offers these attractive terms to re-finance your home loan:

- switch to our flexi rate at the end of 3 years.
- free processing and valuation.
- free fire insurance for first year.
- legal fees absorbed by us (for refinance only) *
- payment holiday up to 12 months *

* terms and conditions apply

Annuity income is free of tax

If you buy an annuity, the payment that you receive each month is free of personal income tax.

Here is an example:

- you invest $100,000 in a life annuity at age 62
- you get $446 a month (giving a return of 5.3% yearly)
- your annuity income is increased yearly by the bonus declared (not guaranteed)
- refund of your capital less payments received, on early death

The income that you receive each year is free of income tax.

Get an attractive return on your life annuity, free of personal income tax on it.

Enjoy discount on your insurance

We asked our policyholders in a survey how we can best serve them in 2006. 80% said that they to get a discount on their next purchase of insurance.

You can find a suitable plan and get a discount when you visit

Sabah - an interesting holiday destination

Sabah is now becoming an interesting holiday destination for Singaporeans.

The attractions are:

- nature, adventure, montain climbing, marine parks, diving, golfing
- low cost airfare now available through Silk Air (promotion: $240 return)
- good food, sea food
- nice and friendly people, culture

NTUC Income will be offering a special promotion for policyholders.

Get more details. Visit Select "Sabah".

Thursday, January 26, 2006

Medical insurance can be very costly, when you get old

An Australian actuary was surprised to learn that medical insurance premium in Singapore increase with age. He asked, "how is the old folk able to afford paying the premium, which will be very expensive? "

Here is my reply.

NTUC Income offers premium rates at a more affordable level. We offer a choice of 4 plans.

At a younger age, the policyholder can opt for a better plan (eg plan P or plan A) and pay a higher premium. The premium rate is still affordable, ie less than $300 a year.

When the policyholder retires after age 60, the premium can be quite steep, more than $1,000 a year. At that time, the policyholder can move to a lower plan (eg plan B or plan C) and pay a lower premium (compared to plan P or plan A).

Most of the other insurers charge premium rates that are 20% to 50% higher than NTUC Income. Their premium rates will be very expensive at the older ages. It could be $3,000 or more a year.

Advice: take your medical insurance from NTUC Income. We will keep it affordable for you.

Insure your new car with NTUC Income

If you buy a new car, you can insure it with NTUC Income. We offer:

- lower premium, representing a saving of $200 to $400 a year, every year
- protection against loss of warranty, if voided by the manufacturer
- repair at the manufacturer's workshop, if proprietary equipment is needed
- replace with a new car, if it is stolen or totally lost during the first year

You can also get an attractive loan from us.

Give us a call, before you look for your car. We can give you an attractive offer.

6477 7722

Wednesday, January 25, 2006

Does buying an annuity help avoid estate duty?

25 January 2006

Forum Page
Straits Times

I refer to the letter "Does buying an annuity help avoid estate duty" by Ms Chua Qiing Yuan (St Times 24 January).

Ms Chua referred to my previous letter that was printed in the Straits Times on 29 December. I wish to clarify this matter.

Under a life annuity, the purchaser pays a capital sum to receive an income stream for a lifetime. The life insurance company estimates the future income from investing the capital sum and pays out the total capital and income over the expected lifetime of the annuitant. On death, the capital sum is treated as fully expended.

For example, a male annuitant at age 62 can invest $100,000 in a participating life annuity that pays back a monthly income of $524 for a lifetime. This represents a notional return of 6.3% on the invested sum. I use the word "notional return" as it includes a refund of the capital. The monthly income may be increased by a bonus yearly, depending on the actual investment return of the fund. The bonus will increase the notional return.

The annuitant can opt to receive a lower monthly payment of $446 in return for a capital guarantee. In this case, the balance of the capital sum (excluding interest), less the annuity payments received, will be refunded in the event of early death of the annuitant. If the total annuity payment is more than the capital sum, there is no refund.

If there is a refund at the time of death, that refund will be treated as part of the estate and is subject to estate duty. This estate duty is likely to be small, as a significant portion of the capital may have been paid back already.

Most annuitants are likely to survive beyond the refund period or may have bought a life annuity that does not have a capital guarantee. In this case, there is no estate duty.

The key advantage of a life annuity is that it pays an attractive income that is guaranteed for a lifetime. The payout continues even after the capital sum and accrued income has been fully paid out. This is only possible because the annuitants who die earlier leaves behind the balance of their money to pay the annuitants who live longer. This is the concept of sharing of risks.

There is another signficant advantage, often overlooked. The monthly income is
fully exempt from personal income tax. This applies to most life annuities, except those purchased under some special arrangement, such as the Supplementary Retirement Scheme.

NTUC Income has 29,000 annuitants who have invested a total of $1,450 million in these contracts. The average investment is $50,000 per annuitant. The average payout is $4,100 yearly, presenting a notional return of 8.2% on the invested sum.

Tan Kin Lian
Chief Executive Officer

Monday, January 23, 2006

90 people visit my blog each day

This blog has a site meter. It records the number of visitors each day. My site meter shows that 90 people visit my blog each day.

Do tell your friends to visit my blog. I will post my views on insurance, financial and social issues. I hope that you find them to be useful.

Why is term insurance not popular?

Someone asked me, "Why is term insurance not popular?"

The answer is, "agents prefer to sell endowment and whole life insurance".

For example, a policyholder can buy term insurance for $100,000 over 20 years by paying a premium of $400 a year. If they buy a whole life policy, they pay a premium of $2000 a year.

Agents can earn commission of up to 1.5 years of premium when they sell a whole life policy. Yes, they can earn $3,000 on selling a whole life policy to you. You pay for it through the higher premium.

They earn less on their term insurance policy. Maybe $200 to $400 in commission.

So, agents sell whole life and endowment policy. They tell the customer that this is a better plan for the customer. They did not tell the customer that they earn a higher commission.

In reality, the customer is better off to buy a term insurance and to invest the difference in a unit trust or investment linked plan (such as the Ideal plan from NTUC Income) where 100% of the savings is invested.

Be careful about buying a ILP from other insurers. They may take away 1.5 years of your savings as well.

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